Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,720,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day Direct materials Direct labor Total number of patient-days (including ICU) Number of patient-days spent in ICU ICU 2,000 $3,252,000 $ 236 Patient A $ 5,800 $ 28,250 14 0 1a. Predetermined overhead rate 1b. Total cost for patient A 1b. Total cost for patient B 2a. Predetermined ICU overhead rate 2a. Predetermined Other overhead rate 2b. Total cost for patient A 2b. Total cost for patient B Patient B $ 7,500 $ 38,600 Other 18,000 $ 14,468,000 $ 96 Required: 1.Assuming McCullough continues to use only one predetermined overhead rate, calculate: 21 7 a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. per patient-day (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount.) per patient-day per patient-day Total 20,000 $ 17,720,000

Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,720,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day Direct materials Direct labor Total number of patient-days (including ICU) Number of patient-days spent in ICU ICU 2,000 $3,252,000 $ 236 Patient A $ 5,800 $ 28,250 14 0 1a. Predetermined overhead rate 1b. Total cost for patient A 1b. Total cost for patient B 2a. Predetermined ICU overhead rate 2a. Predetermined Other overhead rate 2b. Total cost for patient A 2b. Total cost for patient B Patient B $ 7,500 $ 38,600 Other 18,000 $ 14,468,000 $ 96 Required: 1.Assuming McCullough continues to use only one predetermined overhead rate, calculate: 21 7 a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. per patient-day (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount.) per patient-day per patient-day Total 20,000 $ 17,720,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter4: Job Order Costing

Section: Chapter Questions

Problem 11PA: When setting its predetermined overhead application race, Tasty Box Meals estimated its overhead...

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